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"Australian Commission says airports collecting much higher revenueper passenger than a decade ago"


Sunday, March 5, 2017


ACCC says airports collecting much higher revenue per passenger than a decade ago

By Melissa Davey

United Kingdom – The Guardian


    A report by the Australian Competition and Consumer Commission says airports may not have sufficient incentives to keep costs down.


Major Australian airports have collected $1.57bn more in revenue from airlines and passengers over the past decade than they would have if average prices charged for access to airports had held constant in real terms, a report has found.


The Australian Competition and Consumer Commission’s annual Airport Monitoring Report found that, despite collecting much higher revenues per passenger now than a decade ago, ratings of service quality were not substantially different.


Brisbane airport collected the most additional revenues over the period at $676m, followed by Sydney ($475m), Melbourne ($276m) and Perth ($142m).


“There is no doubt that the airports have had to invest significantly over the decade to keep up with growing passenger numbers,” the report found.


“However, passenger growth may also have better enabled airports to share infrastructure facilities between more people, therefore putting downward pressure on the average fixed cost per passenger. The fact that costs have still increased so markedly therefore raises the question as to whether airports have sufficient incentives to keep costs down.”


Car parking profit margins were also high, with Sydney airport recording a profit margin of 73.1c per dollar of revenue in 2015-16. Brisbane airport had a profit margin of 44.9%, followed by Melbourne (38.2%) and Perth (33.5%) airports.


The ACCC chairman, Rod Sims, said the returns the airports received on car parking showed that they did not face significant competitive constraints when setting prices.


“Airports set the terms and prices to landside areas,” Sims said. “This means that they are in a position to impede competition to on-airport car parking by increasing access costs for alternatives such as off-airport car park operators.”


Sims has called for more regulatory powers to curb exorbitant hikes in aeronautical charges and car parking services. The report found that although the ACCC has monitoring powers over the sector, these powers were not substantial enough.


“Monitoring does not directly restrict the airports from increasing prices and/or lowering service quality,” the report found.


“Nor does it provide the ACCC with a general power to intervene in the airports’ setting of terms and conditions of access to the airports’ infrastructure. In addition, the ACCC’s monitoring of airports is limited in scope and does not enable a detailed assessment of the airports’ performance to establish whether or not an airport has exercised market power to earn monopoly profits.”


The report also examined the proposed western Sydney airport development, with the Sydney airport ownership group currently considering whether it will take up the right to build and operate the proposed airport. If the ownership group rejects the government’s terms and conditions, the government can offer the opportunity to other private companies.


“Consumers and airlines would benefit if Sydney airport and the proposed western Sydney airport were separately owned and competing for customers,” the report found.


“If the government does build the new airport, it could later sell the asset to private investors to operate. An independent operator of western Sydney airport would have a strong incentive to invest, set competitive prices and offer improved service levels to effectively compete with Sydney airport.


“On the other hand, a common owner of the two airports would have an incentive to restrict investment and delay any new airport in order to maximise returns from its existing asset.”


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